Archive for the ‘FCPA Jurisprudence’ Category

Other DOJ Defeats When Asserting Aggressive Enforcement Theories Against Foreign Nationals

Monday, August 31st, 2015

You be the JudgeIn the minds of some, the many recent DOJ defeats when put to its burden of proof in individual Foreign Corrupt Practices Act enforcement actions are of little consequence.

Some have written off the DOJ’s struggle in the recent Sigelman action because it was the result of a key witness admitting he gave false testimony during the trial.

Others have written off the DOJ’s ultimate defeat in the enforcement action against Lindsey Manufacturing and two of its executives because it was, most directly, the result of numerous instances of prosecutorial misconduct.

To some, the DOJ’s defeat in the O’Shea enforcement action  was no big deal because it was, most directly, the result of a key witness knowing “almost nothing” in the words of the judge even though the judge admonished the DOJ that it “shouldn’t indict people on stuff you can’t prove.”

The DOJ’s defeat in the Africa Sting cases, well, where do you even begin with that one.

However, you add up these defeats of little consequence in the minds of some, and the end result is a big consequence:  the DOJ often loses when put to its burden of proof.

The most recent example occurred in a pre-trial ruling in the DOJ’s FCPA prosecution of Lawrence Hoskins. The DOJ’s defeat was not because the quality of its evidence, not because of the DOJ’s conduct in the investigation, but rather a flawed legal theory.

The same people who are likely to view the above DOJ defeats as having little consequence are also likely to view the DOJ’s pre-trial defeat in Hoskins as an anomaly.

Except that it is not.

As summarized in this post, in three prior instances federal court judges have rebuked DOJ enforcement theories in FCPA enforcement actions involving foreign national defendants.

As highlighted in this prior post, in U.S. v. Castle, both the N.D. of Texas and the 5th Circuit ruled against the DOJ as a matter of law regarding the issue of whether “foreign officials” (in the case Canadian nationals) who are excluded from prosecution under the FCPA itself, could nevertheless be prosecuted under the general conspiracy statute (18 USC 371) for conspiring to violate the FCPA.  The courts held that “foreign officials”  could not be prosecuted for conspiring to violate the FCPA.  The rationale was that Congress, in passing the FCPA, only chose to punish one party to the bribe agreement and the DOJ could not therefore  ”override the Congressional intent not to prosecute foreign officials for their participation in the prohibited acts” through use of the conspiracy statute.  The court decisions were based in part on Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206 (1932), a case that also featured prominently in the recent Hoskins pre-trial ruling.

In U.S. v. Bodmer, 342 F.Supp.2d 176 (S.D.N.Y. 2004), Judge Shira Scheindlin addressed the question “whether prior to the 1998 amendments, foreign nationals who acted as agents of domestic concerns, and who were not residents of the United States, could be criminally prosecuted under the FCPA.”  Judge Scheindlin concluded that the FCPA’s language, as it existed prior to the 1998 amendments, was ambiguous and she thus resorted to legislative history.  Judge Scheindlin further commented in dismissing the FCPA charges against Bodmer (as Swiss national) as follows.  “After consideration of the statutory language, legislative history, and judicial interpretations of the FCPA, the jurisdictional scope of the statute’s criminal penalties is still unclear.” Thus, the rule of lenity required dismissal according to Judge Scheindlin.

As highlighted in this prior post, in the Africa Sting enforcement action Judge Leon dismissed a substantive FCPA charge against Pankesh Patel (a U.K. national) based on the DOJ’s enforcement theory that Patel was subject to the FCPA’s jurisdiction because he allegedly sent a DHL packing in furtherance of the bribery scheme from the U.K. to the U.S.  Although Judge Leon did not issue a formal written decision, the trial court transcript is clear that he disagreed with the DOJ’s legal theory.

Granted the DOJ’s enforcement action against Hoskins remains active, but at present the DOJ is believed to be 0-4 when asserting aggressive FCPA enforcement theories against foreign nationals.

To some, this is of little consequence.

The rule of law would disagree.

It is interesting to note that the DOJ of course asserts aggressive FCPA enforcement theories against foreign companies as well.However, no foreign company has challenged the DOJ in these enforcement actions – it is simply easier, more certain and more efficient to roll over, play dead, and agree to resolve the enforcement action.

Yet, if certain foreign companies would have challenged the DOJ, the likely result in several enforcement actions may have been DOJ defeats.

The Importance Of The FCPA’s Legislative History

Tuesday, August 25th, 2015

CongressTo some, the legislative history of the Foreign Corrupt Practices Act is not important.

However, there is one category of persons who rightly care about the motivations of Congress in passing the FCPA, the competing bills Congress considered in enacting the FCPA, and Congress’s intent as to various elements of the FCPA.

That group is federal court judges.

As readers no doubt know, judicial scrutiny of FCPA enforcement theories is sparse.  Yet when it does occur, a common thread in most FCPA judicial decisions is discussion and analysis of the FCPA’s legislative history, often but not exclusively because the judge found various provisions of the FCPA ambiguous.

The recent decision (see here for the prior post) by  Judge Janet Bond Arterton (D. Conn.) trimming the DOJ’s FCPA enforcement action against Lawrence Hoskins by granting in part his motion to dismiss and denying a DOJ motion in limine was based primarily on the FCPA’s legislative history and what it revealed about Congress’s intent in capturing a certain category of defendant.

Likewise, although the 11th Circuit completely bungled its analysis of the FCPA’s legislative history relevant to the “foreign official” element in its 2014 U.S. v. Esquenazi opinion (see this article at pgs. 24-42 for a detailed analysis), the opinion nevertheless contained much discussion of the FCPA’s legislative history.

Several FCPA commentators object to the notion that the FCPA is ambiguous or that resort to legislative history is important. This Forbes article titled “Top 5 Misconceptions About The FCPA” set out to “clear up a few misconceptions about the FCPA.”  Number one on the list of misconceptions was that ‘the FCPA is a vague statute.”  The FCPA Blog has long maintained (see here and here for examples) that FCPA lawyers say that the law is “complicated, technically challenging, obscure, poorly drafted and badly organized” but warns,” don’t believe it. There’s no evidence in the record that judges or juries have any trouble understanding the FCPA.”

The above protestations and observations are just plain wrong.  There is abundant ”evidence in the record” that the FCPA is an ambiguous statute and/or that the FCPA’s legislative history is important.

In addition, to the recent Hoskins and Esquenazi cases, this post summarizes the many other instances in which federal court judges have found various provisions of the FCPA to be ambiguous and/or have consulted the FCPA’s legislative history.

In SEC v. Straub,  921 F.Supp.2d 244 (S.D.N.Y. 2013) Judge Richard Sullivan (see here for the prior post) found the FCPA’s jurisdictional element ambiguous and thus consulted the legislative history.

In SEC v. Jackson, 908 F.Supp.2d 834 (S.D.Tex. 2012)Judge Keith Ellison consulted the FCPA’s legislative history regarding: the need to identify the “foreign official,” the facilitation payments exception, and the corrupt intent element.

In U.S. v. Jensen, 532 F.Supp.2d 1187 (N.D. Cal. 2008), Judge Charles Breyer stated as follows regarding  § 78m(b)(5) which makes “knowing” violations of the FCPA books and records and internal control provisions a crime.  “Because the plain language of § 78m(b)(5) is not unambiguous, the Court turns to legislative history.”

In U.S. v. Kozeny, 582 F.Supp.2d 535 (S.D.N.Y. 2008), Judge Shira Scheindlin consulted the legislative history in a decision concerning the FCPA’s local law affirmative defense.

In U.S. v. Kozeny, 493 F.Supp.2d 693 (S.D.N.Y. 2007), Judge Scheindlin stated as follows concerning the statute of limitations applicable to FCPA criminal violations.  “I find that [18 U.S.C. § 3282] is ambiguous, and turn to its legislative history for guidance on its proper interpretation.”

In U.S. v. Bodmer, 342 F.Supp.2d 176 (S.D.N.Y. 2004), Judge Scheindlin addressed the question “whether prior to the 1998 amendments, foreign nationals who acted as agents of domestic concerns, and who were not residents of the United States, could be criminally prosecuted under the FCPA.”  Judge Scheindlin concluded that the FCPA’s language, as it existed prior to the 1998 amendments, was ambiguous and she thus resorted to legislative history.  Judge Scheindlin further commented in dismissing the FCPA charges against Bodmer as follows.  “After consideration of the statutory language, legislative history, and judicial interpretations of the FCPA, the jurisdictional scope of the statute’s criminal penalties is still unclear.”

In Stichting v. Schreiber, 327 F.3d 173 (2d Cir. 2003), the Court stated as follows.  “It is difficult to determine the meaning of the word “corruptly” simply by reading it in context. We therefore look outside the text of the statute to determine its intended meaning. [...]  (“Legislative history and other tools of interpretation may be relied upon only if the terms of the statute are ambiguous.”

In U.S. v. Kay, 200 F.Supp.2d 681 (S.D. Tex. 2002), Judge David Hittner concluded that the FCPA’s “obtain or retain business” element was ambiguous and thus turned to an analysis of the legislative history.  On appeal, the Fifth Circuit (see 359 F.3d 738 (5th Cir. 2004)) likewise stated as follows prior to an extensive review of the FCPA’s legislative history.

“[T]he district court concluded that the FCPA’s language is ambiguous, and proceeded to review the statute’s legislative history.  We agree with the court’s finding of ambiguity for several reasons. Perhaps our most significant statutory construction problem results from the failure of the language of the FCPA to give a clear indication of the exact scope of the business nexus element; that is, the proximity of the required nexus between, on the one hand, the anticipated results of the foreign official’s bargained-for action or inaction, and, on the other hand, the assistance provided by or expected from those results in helping the briber to obtain or retain business. Stated differently, how attenuated can the linkage be between the effects of that which is sought from the foreign official in consideration of a bribe (here, tax minimization) and the briber’s goal of finding assistance or obtaining or retaining foreign business with or for some person, and still satisfy the business nexus element of the FCPA?”

In U.S. v. Blondek, 741 F.Supp. 116 (N.D.Tex 1990), Judge Harold Sanders consulted the FCPA’s legislative history in concluding that “foreign officials” can not be charged with conspiracy to violate the FCPA.

To some, the FCPA’s legislative history is nothing more than a history lesson.

However, federal court judges who interpret the FCPA in the rare occasions they are given an opportunity to do have consistently reminded us otherwise.

This is why the Story of the FCPA (see here for the article) remains important today.

Judge Trims DOJ’s FCPA Enforcement Action Against Lawrence Hoskins

Monday, August 17th, 2015

Judicial DecisionLast week, U.S. District Court Judge Janet Bond Arterton (D. Conn.) trimmed the DOJ’s FCPA enforcement action against Lawrence Hoskins (a former Alstom executive criminally charged in August 2013 – see here) by granting in part his motion to dismiss and denying a DOJ motion in limine.

In pertinent part, Hoskins (a U.K. citizen) moved to dismiss count one of the DOJ’s Third Superseding Indictment “on the basis that it charges a legally invalid theory that he could be criminally liable for conspiracy to violate the FCPA even if the evidence does not establish that he was subject to criminal liability as a principal, by being an “agent” of a “domestic concern.”

As stated by Judge Arterton:

“Relatedly, the Government moves in limine to preclude Defendant from arguing to the jury that it must prove that he was the agent of a domestic concern because the Government contends that Defendant can also be convicted under theories of accomplice liability. For the reasons that follow, Defendant’s Motion to Dismiss Count One of the Third Superseding Indictment will be granted in part to preclude Defendant’s FCPA conspiracy prosecution from being de-linked from proof that he was an agent of a domestic concern and the Government’s Motion in Limine is denied.”

In the words of Judge Arterton:

“[T]hese two motions put before the Court the question of whether a nonresident foreign national could be subject to criminal liability under the FCPA, even where he is not an agent of a domestic concern and does not commit acts while physically present in the territory of the United States, under a theory of conspiracy or aiding and abetting a violation of the FCPA by a person who is within the statute’s reach.2 The Court concludes that the answer is “no” and that accomplice liability cannot extend to this Defendant under such circumstances and thus Defendant’s Motion to Dismiss Count One is granted in part and the Government’s Motion in Limine is denied.”

Judge Arterton began by discussing the Gebardi Principle that has been used previously by judges in dismissing DOJ FCPA enforcement actions against foreign nationals (Castle and Bodmer referenced below)  Specifically, the Judge noted as follows.

“[T]he Gebardi principle is that where Congress chooses to exclude a class of individuals from liability under a statute, “the Executive [may not] . . . override the Congressional intent not to prosecute” that party by charging it with conspiring to violate a statute that it could not directly violate. United States v. Castle, 925 F.2d 831, 833 (5th Cir. 1991); see also United States v. Bodmer, 342 F. Supp. 2d 176, 181 n.6 (S.D.N.Y. 2004) (“In Gebardi, the Supreme Court held that where Congress passes a substantive criminal statute that excludes a certain class of individuals from liability, the Government cannot evade Congressional intent by charging those individuals with conspiring to violate the same statute.”). The Gebardi principle also applies to aiding and abetting liability.

In determining whether the Gebardi principle applies, the question is “not whether Congress could have” reached a certain class of individuals under the conspiracy or aiding and abetting statutes, “but rather whether Congress intended to do so, or more specifically, whether Congress intended the general conspiracy statute” to apply to these individuals.5 Castle, 925 F.2d at 835 (emphasis in original).

The Government maintains that Gebardi recognized only a “narrow exception to [the] long-established legal principle” that “the conspiracy and accomplice liability statutes apply to classes of persons who lack the capacity to commit a violation of the underlying substantive crime.”  It maintains that this exception only “applies in two limited circumstances: (1) where a class of person is a necessary party to the crime and was specifically excluded from prosecution for the substantive violation by Congress (e.g., the foreign official who receives the bribe payment under the FCPA, or the woman who is transported across state lines under the Mann Act); or (2) where the substantive statute was enacted to protect the class of person to which the individual belongs (e.g., victims).”  Defendant maintains that Gebardi applies whenever “Congress affirmatively chooses to exclude a certain class of individuals from liability under a criminal statute.”

The Court agrees with Defendant that the Government’s interpretation of Gebardi is too narrow and that while the two “[f]actual scenarios . . . posited by the government bring Congress’s intent into view and, thereby, make it easier to glean the existence of an affirmative legislative policy,” Congressional intent can be evident in other circumstances. For example, in Amen, the Second Circuit applied Gebardi and held that a person who was not the head of a criminal enterprise could not be subject to the drug “kingpin” statute’s sentencing enhancement under a theory that he aided and abetted a violation, because “[w]hen Congress assigns guilt to only one type of participant in a transaction, it intends to leave the others unpunished for the offense.” 831 F.2d at 381.

The Second Circuit’s reasoning was not, as the Government maintains, that a violation of the kingpin statute requires “the participation of two classes of persons— those who lead a criminal enterprise, on the one hand, and those who are led, on the other” and that “Congress chose only to provide for an enhanced punishment of one of those necessary parties.”  Rather, the Second Circuit reasoned that while the statute’s “legislative history makes no mention of aiders and abettors, it makes it clear that the purpose . . . was not to catch in the [kingpin] net those who aided and abetted the supervisors’ activities.”

Judge Arterton relied extensively on the FCPA’s legislative history to support her decisions. The application section of the ruling states in its entirety as follows.

“The clearest indication of legislative intent is the text and structure of the FCPA, which carefully delineates the classes of people subject to liability and excludes nonresident foreign nationals where they are not agents of a domestic concern or did not take actions in furtherance of a corrupt payment within the territory of the United States. See Community for Creative Non–Violence v. Reid, 490 U.S. 730, 739 (1989) (“The starting point for [the] interpretation of a statute is always its language.”).

In United States v. Castle, 925 F.2d 831, 832 (5th Cir. 1991), the Fifth Circuit applied Gebardi to conclude that another class of individuals not subject to liability as principals under the FCPA—the foreign officials who accept bribes—could not be prosecuted for conspiracy to violate the FCPA. The Fifth Circuit found an intent in the FCPA to exclude the foreign bribe recipients because, in enacting the FCPA in 1977 in the aftermath of the Watergate scandal, Congress was principally “concerned about the domestic effects of such payments,” such as “the distortion of, and resulting lack of confidence in, the free market system within the United States.” Id. at 834–35.

Congress was aware that it “could, consistently with international law, reach foreign officials in certain circumstances,” but it was also concerned about “the ‘inherent jurisdictional, enforcement, and diplomatic difficulties’ raised by the application of the bill to non-citizens of the United States” and decided not to do so. Id. at 835 (quoting H.R.Conf.Rep. No. 831, 95th Cong., 1st Sess. 14, reprinted in 1977 U.S.Code Cong. & Admin.News 4121, 4126).7 From the text of the statute and the legislative history expressing concern about reaching non-citizens, the Fifth Circuit found “in the FCPA what the Supreme Court in Gebardi found in the Mann Act: an affirmative legislative policy to leave unpunished a well-defined group of persons who were necessary parties to the acts constituting a violation of the substantive law.” Id. at 836.

Legislative History of 1977

Although the text and structure of the FCPA provide strong indication that Congress did not intend for non-resident foreign nationals to be subject to the FCPA unless they were agents of a domestic concern or acted in the territory of the United States, the Court also considers the legislative history of the Act.

While the extensive legislative history of the enactment of the FCPA in 1977 and its amendments in 1998 identified by the parties contain little discussion of accomplice liability, that which does exist is consistent with what the plain text and structure of the final enactment implies regarding the limits of liability for non-resident foreign nationals. The initial version of the Senate bill introduced by the Committee on Banking, Housing and Urban Affairs on June 2, 1976 made it unlawful for any U.S. “issuer” or “domestic concern” to use any means or instrumentality of interstate commerce to authorize or pay a bribe. S. 3664, 94th Cong. (1976). “Domestic concern” was defined to include (1) U.S. citizens and nationals and (2) entities owned or controlled by U.S. citizens and nationals that were either incorporated in or had a principal place of business in the United States. Id. at 7.

An amendment to the Senate bill responded to a request by the administration of President Carter “to clearly cover under the bill individuals making payments” that was not “crystal clear” in the original version. Markup Session on S. 305, Senate Comm. on Banking, Housing and Urban Affairs, 95th Cong., 8 (Apr. 6, 1977). The definition of domestic concern was left unchanged, but the proposal added that officers, directors, employees and stockholders acting on behalf of U.S. issuers or domestic concerns, irrespective of nationality, would be liable for making bribes on behalf of the company. S. Rep. No. 95-114, at 11; 123 Cong. Rec. 13817 (1977). Although the Carter Administration requested that liability be extended to foreign subsidiaries of U.S. companies, Markup Session on S. 305 at 9, the Senate declined to do so, S. Rep. No. 95-114.

A competing House bill introduced on February 22, 1977 provided for broader liability for non-resident foreign nationals than the Senate bill, proposing liability not just for non-U.S. officers, directors, and employees of domestic concerns, but also (1) any “agent” of a U.S. issuer or domestic concern who “carried out” a bribe and (2) officers, directors, and employees of foreign affiliates irrespective of nationality. H.R. 3815 §§ 30A(c)(2), 3(c)(2), 3(f)(2)(A), 95th Cong. (1977).

The FCPA as enacted included elements from both the Senate and House bills, extending liability to agents of domestic concerns as the House proposed, but limiting criminal liability of agents and employees of domestic concerns to a person who was a “United States citizen, national, or resident or is otherwise subject to the jurisdiction of the United States,” and predicated such person’s criminal liability on a finding that the domestic concern itself had violated the statute. 15 U.S.C. § 78dd-2(b)(1)(B)(3) (1977).

The final bill excluded foreign affiliates of U.S. companies, as the Senate proposed, which the House Conference Report described as a “recogni[tion] [of] the inherent jurisdictional, enforcement and diplomatic difficulties raised by the inclusion of foreign subsidiaries of U.S. companies in the direct prohibitions of the bill.” H.R. Conf. Rep. No. 95-831, at *14. The Report explained, however, that because U.S. citizens, nationals, and residents were defined as domestic concerns, they could be liable for engaging in bribery “indirectly” through another person and that the “jurisdictional, enforcement and diplomatic difficulties” that applied to extending liability to foreign subsidiaries did not apply to “citizens, nations, or residents of the United States.” Id.

The Government notes that early versions of the Senate and House committee reports discussed accomplice liability: The committee fully recognizes that the proposed law will not reach all corrupt payments overseas. For example, Sections 2 and 3 would not permit prosecution of a foreign national who paid a bribe overseas acting entirely on his own initiative. The committee notes, however, that in the majority of bribery cases investigated by the SEC some responsible official or employee of the U.S. parent company had knowledge of the bribery and either explicitly or implicitly approved the practice. Under the bill as reported, such persons could be prosecuted. The concepts of aiding and abetting and joint participation would apply to a violation under this bill in the same manner in which those concepts have always applied in both SEC civil actions and in implied private actions brought under the securities laws generally. H.R. Rep. No. 95-640, at 8 (1977); S. Rep. No. 94-1031, at 7 (1976).

As discussed above, this legislative history discussing an early version of the bill was later clarified in response to concerns by the Carter Administration that the extent of individual liability (including for U.S. nationals) was not “crystal clear.” Rather than resorting to concepts of accomplice liability, the enacted version specifically delineated the extent of individual liability by “mak[ing] it clear that” the delineated individuals were “covered directly.” Markup Session on S. 305, Senate Comm. on Banking, Housing and Urban Affairs, 95th Cong., 8, 12 (Apr. 6, 1977). Therefore, the discussion of accomplice liability cited by the Government does not suggest that Congress intended for those who were excluded from direct liability under the Act to be subject to accomplice liability but only shows that Congress considered imposing individual liability based on concepts of accomplice liability but instead chose to do so directly and carefully delineated the class of persons covered to address concerns of overreaching.

Thus, as in Amen and Gebardi, even absent explicit discussion in the legislative history of accomplice liability, the carefully-crafted final enactment evinces a legislative intent to cabin such liability. See Amen, 831 F.2d at 382; Gebardi, 287 U.S. at 123. As the Fifth Circuit explained, when Congress “listed all the persons or entities who could be prosecuted” under the FCPA, it “intended that these persons would be covered by the Act itself, without resort to the conspiracy statute” and, as in Gebardi, that intent cannot be circumvented by resort to conspiracy and aiding and abetting liability. Castle, 925 F.2d at 836.

1998 Amendments

While the Government argues that the original version of the FCPA in 1977 provided for accomplice liability, it maintains that after the 1998 amendments to the FCPA “Congress unequivocally provided that it intended the accomplice liability and conspiracy statutes to apply to foreign nationals not otherwise subject to the FCPA as principals.” The 1998 amendments to the FCPA were “enacted to ensure the United States was in compliance with its treaty obligations,” United States v. Esquenazi, 752 F.3d 912, 923 (11th Cir. 2014), after the United States ratified the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”). Dec. 17, 1997, S. Treaty Doc. No. 105–43, 37 I.L.M.; International Anti– Bribery and Fair Competition Act of 1998, Pub.L. No. 105–366, 112 Stat. 3302.

The OECD Convention required each signatory country to “take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally” to bribe foreign officials. OECD Convention art. 1.1. In response, the 1998 amendments expanded the scope of liability in three ways. First, Congress added 15 U.S.C. § 78dd-3(a), which prohibited those individuals or entities that did not already fall under other provisions of the statute from taking action “while in the territory” of the United States in furtherance of corrupt payments. 15 U.S.C. § 78dd-3(a). Second, the 1998 amendments eliminated a disparity in penalties between U.S. and foreign nationals acting as agents of domestic concerns whereby previously foreign nationals were subject only to civil penalties. The amendment made clear that foreign nationals acting as agents of domestic concerns could be criminally prosecuted for violating the FCPA if they used some manner or means of interstate commerce. 15 U.S.C. § 78dd-2. Third, Congress provided for nationality jurisdiction12, providing that it “shall also be unlawful for any United States person to corruptly do any act outside the United States in furtherance of” a foreign bribe. 15 U.S.C. § 78dd-2(i)(1); see also S. REP. 105-277, at *2–3 (1998) (describing these three changes to the FCPA as being intended “to conform it to the requirements of and to implement the OECD Convention”).

The Government maintains that because the OECD Convention required each signatory country to make it a “criminal offense under its law for any person” to pay a foreign bribe, OECD Convention, art. 1.1 (emphasis added), the “1998 amendments expanded the jurisdictional reach of the FCPA to cover any person over whom U.S. courts have jurisdiction” and a contrary interpretation “would place the United States in violation of its treaty obligations.” While the Supreme Court has admonished that “courts should be most cautious before interpreting . . . domestic legislation in such manner as to violate international agreements,” Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 539 (1995), this Court does not agree with the Government’s contention that the OECD Convention required or even contemplated the extent of liability sought by the Government here by using the term “any person.”

Rather, the OECD’s reference to “any person” is cabined by Article 4 of the Convention, addressing jurisdiction, which provides that each signatory “shall take such measures as may be necessary to establish its jurisdiction over the bribery of a foreign public official when the offense is [1] committed in whole or in part in its territory” (OECD Convention, art. 4.1) or [2] by its own nationals while abroad (id., art. 4.2). Therefore, there is no indication that the OECD Convention requires the United States to prosecute foreign bribery committed abroad by non-resident foreign nationals who conspire with United States citizens.

Based on the text and structure of the FCPA and the legislative history accompanying its enactment and its amendment, the Court concludes that Congress did not intend to impose accomplice liability on non-resident foreign nationals who were not subject to direct liability. Count One will not be dismissed in its entirety, however, because if the Government proceeds under the theory that Mr. Hoskins is an agent of a domestic concern and thus subject to direct liability under the FCPA, the Gebardi principle would not preclude his criminal liability for conspiring to violate the FCPA. The Government may not argue, however, that Defendant could be liable for conspiracy even if he is not proved to an agent of a domestic concern.”


Hoskins is represented by Christopher Morvillo and David Raskin of Clifford Chance.

11th Circuit Discusses “Routine Governmental Action” Prong Of The FCPA’s Facilitation Payments Exception

Wednesday, February 11th, 2015

11th Cir.This February 2013 post highlighted the criminal appeal of Jean Rene Duperval, the alleged “foreign official” at the center of the various Haiti Teleco enforcement actions, including U.S. v. Esquenazi, the recent 11th Circuit decision concerning the “foreign official” element.

In connection with the Haiti Teleco cases, Duperval was found guilty by a jury on various money laundering charges. As highlighted in the prior post, Duperval appealed his conviction to the 11th Circuit and among the issues appealed were:

  • whether the evidence was “insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”
  • various due process challenges concerning the declaration of the Haitian Prime Minister; and
  • whether the “trial court erred in not charging the jury in accordance with Duperval’s proffered theory of defense instruction” as to whether the FCPA’s facilitation payments exception applied.

Earlier this week, the 11th Circuit issues this opinion.  The opinion begins as follows.

“This appeal of criminal convictions involving money laundering and foreign bribery presents issues of exposure of jurors to publicity; the sufficiency of the evidence that a telephone company was an “instrumentality” of a foreign government, 15 U.S.C. § 78dd-2(h)(2)(A); whether the administration of a multimillion dollar contract is “routine governmental action,” id. § 78dd-2(h)(4)(A); whether the government interfered with a witness when it obtained a clarifying declaration from that witness; and four issues about the application of the United States Sentencing Guidelines. Jean Rene Duperval appeals both his convictions of two counts of conspiring to commit money laundering, 18 U.S.C. § 1956(h), and 19 counts of concealment of money laundering, id. § 1956(a)(1)(B)(i), and his sentence of imprisonment of 108 months followed by three years of supervised release. Duperval worked as the Director of International Affairs at Telecommunications D’Haiti, a company owned by the government of Haiti. Duperval participated in two schemes in which international companies gave him bribes in exchange for favors from Teleco. Duperval’s arguments fail. We affirm.”

As relevant to “foreign official,” the 11th Circuit’s discussion of this issue in Duperval mirrors the 11th Circuit’s conclusion in U.S. v. Esquenazi.  In short, in Duperval the court stated: “[i]n Esquenazi and this appeal, the government introduced almost identical evidence about Teleco. [...] As in Esquenazi, the jury could have reasonably found that Teleco was an instrumentality of Haiti.”

As relevant to the “routine government action” portion of the facilitation payments exception, the 11th Circuit stated:

“Duperval admitted that he received money from Cinergy and Terra, but he asserted that the money was for doing a good job in the administration of the contracts. Duperval’s counsel requested a jury instruction based on an exception to the Act for routine governmental action, id. § 78dd-2(b), but the district court denied this request.”


“Duperval argues that the district court erred when it refused his proffered jury instruction. Duperval requested that the district court instruct the jury on the exception to the Foreign Corrupt Practices Act for routine governmental action, 15 U.S.C. § 78dd-2(b). Duperval argues that he was entitled to an instruction on this defense because he introduced evidence that he was paid only for administering the contracts within their terms. But we conclude that the district court did not err when it refused Duperval’s instruction.

A defendant has the right to have the jury instructed on a theory of defense only if “the proposed instruction presents a valid defense and [if] there has been some evidence adduced at trial relevant to that defense.” United States v. Ruiz, 59 F.3d 1151, 1154 (11th Cir. 1995). When we review the refusal to give an instruction for abuse of discretion, we ask whether “the requested instruction is correct, not adequately covered by the charge given, and involves a point so important that failure to give the instruction seriously impaired the party’s ability to present an effective case.” Svete, 556 F.3d at 1161 (internal quotation marks omitted). But we need not engage in this inquiry if the defendant failed to introduce evidence relevant to the jury instruction.

The Act allows “any facilitating or expediting payment to a foreign official . . . the purpose of which is to expedite or to secure the performance of a routine governmental action.” 15 U.S.C. § 78dd-2(b). Routine governmental action includes actions such as “obtaining permits . . . to do business[;] . . . processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections[; and] . . . providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products.” Id. § 78dd-2(h)(4)(A). Other actions are routine governmental action only if they are “actions of a similar nature” to those listed in the statute. Id. § 78dd-2(h)(4)(A)(v). But routine governmental action “does not include . . . any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.” Id. § 78dd-2(h)(4)(B).

Duperval argues that he performed a routine governmental action when he administered the contracts, but he misunderstands this exception to the Act. As the Fifth Circuit explained, “[a] brief review of the types of routine governmental actions enumerated by Congress shows how limited Congress wanted to make the . . . exception[].” United States v. Kay, 359 F.3d 738, 750 (5th Cir. 2004). These actions are “largely non-discretionary, ministerial activities performed by mid- or low-level foreign functionaries,” id. at 751, and the payments allowed under this exception are “grease payments” to expedite the receipt of routine services, id. at 747. The administration of a multi-million dollar telecommunication contract is not an “action[] of a similar nature” to the actions enumerated in the Act. 15 U.S.C. § 78dd-2(h)(4)(A)(v). Duperval was not a low-level employee who provided a routine service; he was a high ranking official who administered international contracts. And, when Terra and Cinergy paid Duperval, their “grease payment” was not to expedite the receipt of a routine service. Duperval was not “providing phone service” as the Act uses that term, id. § 78dd-2(h)(4)(A)(iv). “[P]hone service” appears along with “providing . . . power and water supply, loading and unloading cargo, or protecting perishable products.” Id. The text of the statute refers to the government providing a service to a person or business, not to the government administering contracts with companies that provide telephone service.

Duperval’s interpretation also is in tension with the section of the Act that describes what is not routine governmental action, id. § 78dd-2(h)(4)(B). A party cannot pay a decision-maker to continue a contract with the government, id., but under Duperval’s interpretation, a party could circumvent this limitation by “rewarding” the decision-maker for doing a good job in administering the current contract. This interpretation, which would provide an end-run around the provisions of the Act, finds no support in the text of the Act. Duperval presented evidence that he administered multi-million dollar contracts. He failed to prove that he performed a routine governmental action. Without any evidence to support his defense, Duperval was not entitled to his requested jury instruction.”

The 11th Circuit’s conclusion as to “routine governmental action,” was hardly surprising given the facts at issue in Duperval and Duperval’s argument.

Nevertheless, the 11th Circuit’s discussion of facilitation payments in Duperval is believed to be the first time an appellate court has squarely  addressed this prong of the FCPA (as the Fifth Circuit’s discussion of facilitation payments in Kay was dicta).

Friday Roundup

Friday, January 9th, 2015

Roundup2From the dockets, cleared, when the dust settles, outreach, and quotable.  It’s all here in the Friday roundup.

From the Dockets


This recent post highlighted the motion to dismiss filed by Joseph Sigelman.  Among other things, Sigelman challenged the DOJ’s interpretation and application of the “foreign official” element in regards to Ecopetrol, the alleged “the state-owned and state-controlled petroleum company in Colombia.”

On December 30th, U.S. District Judge Joseph Irenas denied the motion (as well as addressed other motions) in a 1 page order.


This recent post highlighted the motion to dismiss filed by Lawrence Hoskins. Among other things, the motion argued that the indictment “charges stale and time-barred conduct that occurred more than a decade ago; it asserts violations of U.S. law by a British citizen who never stepped foot on U.S. soil during the relevant time period; and, it distorts the definition of the time-worn legal concept of agency beyond recognition.”

In this December 29th ruling, U.S. District Court Judge Janet Arterton (D. Conn.) denied the motion to dismiss concluding that factual issues remain as to the disputed issues.


Remember Kazuo Okada and Universal Entertainment Corp.  They were at the center of a boardroom battle royal with Wynn Resorts in which a Wynn sanctioned report stated:

“Mr. Okada, his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two (2) chief gaming regulators at the Philippines Amusement and Gaming Corporation (“PAGCOR”), who directly oversee and regulate Mr. Okada’s Provisional Licensing Agreement to operate in that country.  Since 2008, Mr. Okada and his associates have made multiple payments to and on behalf of these chief regulators, former PAGCOR Chairman Efraim Genuino and Chairman Cristino Naguiat (his current chief regulator), their families and PAGCOR associates, in an amount exceeding $110,000.”  The report categorizes this conduct as “prima facie violations” of the FCPA.

Universal recently issued this release which states:

“The Prosecutor General of the Philippines has proposed to the Secretary of Justice to terminate the investigation into the groundless suspicion that our group may have offered bribes to officials of Philippine Amusement and Gaming Corporation …”.

When The Dust Settles

It is always interesting to see what happens when the dust settles from an FCPA enforcement action (see here for the prior post).

A portion of the recent Alstom enforcement action alleged improper payments in connection with power projects with the Bahamas Electricity Corporation (“BEC”), the state-owned and state-controlled power company.

According to the Nassau Guardian ”Attorney General Allyson Maynard-Gibson said The Bahamas has requested information from the US regarding the allegations, including the identity of the alleged bribe taker.”

This follow-up report states:

“Former Bahamas Electricity Corporation (BEC) board member Philip Beneby said on Tuesday he would find it hard to believe that any member of the board accepted bribes from a French power company to swing BEC contracts its way. [...] “The allegation is stating that a member of the board received some kickback, but it’s kind of strange to me that a member of the board would receive a kickback if the board unanimously agreed that the contract be awarded to Hanjung out of Korea, then only to find out later that the Cabinet overturned the board’s decision. So that decision to not award Hanjung from Korea the contract came from the Cabinet, not from the board.” According to Beneby and former minister with responsibility for BEC, Bradley Roberts, in 2000 the board of BEC unanimously voted to award a generator contract to Hanjung Co. out of South Korea, but that decision was overturned by the then Ingraham Cabinet, which decided to award the contract to Alstom (then ABB). [...] Former deputy prime minister Frank Watson was the minister at the time responsible for BEC. He said the decision to award the contract to Alstom was a Cabinet decision that involved no bribery. Watson insisted he was unaware of any claims that a bribe had been paid with respect to the award of that particular contract. Beneby, who is the proprietor of Courtesy Supermarket, said he remembers the event quite well as it was the first time a board decision was overturned.”

As explored in this prior post, many FCPA enforcement actions assume an actual casual link between alleged payments and obtaining or retaining business.  However, the reality is that such a casual link is not always present.


This event notice from the New England Chapter of the National Defense Industrial Association caught my eye.

“FBI Seminar on FCPA and International Corruption: Outreach to Industry Education Session

Join us for an engaging morning seminar to learn how to be compliant with the Foreign Corrupt Practices Act (FCPA). The FBI’s International Corruption Unit (ICU) is conducting private sector outreach and education to support a new initiative.  The FBI recognizes the importance of forging new partnerships and strengthening existing relationships to help level the playing field for US businesses competing internationally.  By fostering better understanding of FCPA requirements, the FBI and private sector can join forces more efficiently to fight international corruption and ensure fair global markets and a strong US economy.

The FBI is excited to showcase five pillars of FCPA compliance in their program: Private Sector Outreach, Training and Education, Dedicated Personnel, Domestic and International Partnerships and Proactive Enterprise Theory Investigations.  Utilizing the five pillars approach, the FBI is gaining new momentum and expertise.

Additionally, the FBI will discuss new analysis outlining bribery hotspots and trends.  Using charts and graphs the FBI will examine the latest bribe payment techniques, who is paying bribes and who is accepting bribes.  Specific regions of the world will be discussed along with the various risks associated with doing business in these areas.

Lastly, the FBI will present a guest speaker who violated the FCPA, cooperated with the FBI and eventually was incarcerated for his crimes.  This segment will provide a unique and impactful insight into the rationalization of an employee who paid bribes, despite knowledge and training on FCPA.The FBI is looking forward to the opportunity to discuss best practices and enhance FCPA compliance with industry partners”


This recent Forbes article ask “isn’t it strange that the U.S. gets to fine Alstom, a French company, for bribery not in the U.S.?” The article concludes:

“It’s most certainly not good economics that one court jurisdiction gets to fine companies from all over the world on fairly tenuous grounds. Who would really like it if Russia’s legal system extended all the way around the world? Or North Korea’s? And I’m pretty sure that the non-reciprocity isn’t good public policy either. Eventually it’s going to start getting up peoples’ noses and they’ll be looking for ways to punish American companies in their own jurisdictions under their own laws. And there won’t be all that much that the U.S. can honestly do to complain about it, given their previous actions.”

That is pretty much what Senator Christopher Coons said during the November 2010 Senate FCPA hearing. “”Today we the only nation that is extending extraterritorial reach and going after the citizens of other countries, we may someday find ourselves on the receiving end of such transnational actions.”

In a recent speech, Stuart Alford QC (Joint Head of Fraud at the Serious Fraud Office) addressed the following question:  ”why have there been no Bribery Act prosecutions; is this Act really being taken seriously?”  In response to his own question, Alford stated, in pertinent part:

“The Bribery Act is not retrospective. Therefore, for conduct to be criminal under the Act it has to have been undertaken after 1 July 2011. Often conduct of this type takes some time to surface; and, once it does, it takes time to investigate. SFO cases must, by definition, be serious or complex and they very often include international parties and conduct. While the SFO is always striving to investigate criminal conduct in as timely a way as possible, these types of cases will take some time to move through the process of investigation and on to prosecution.

The Bribery Act represented a very significant shift in setting the standards for the more ethical corporate culture I referred to a moment ago. When one looks at legislation of this kind, both here and abroad, one can see that a flow of prosecutions can take time to develop. We only have to look at the 1977 Foreign Corrupt Practices Act in the USA, to see that it took many years for that work to build up a head of steam, and not really until the turn of the century did we start to see the level of prosecutions that we do now.”

Spot-on and consistent with my own observations on July 1, 2011 when the Bribery Act went live.

Top Book Review

International Policy Digest recently compiled its top book reviews of 2014.  On the list is the following.

Review of Mike Koehler’s ‘The Foreign Corrupt Practices Act in the New Era’

By John Giraudo

If you care about the rule of law, ‘The Foreign Corrupt Practices Act in the New Era’ by Mike Koehler, is one of the most important books you can read—to learn how it is being eroded. Professor Koehler’s book may not make it to the top of any summer reading list, but it is a must read for people who care about law reform.

For more information on the book, see here.


A good weekend to all.